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Key Takeaways from Freeport-McMoRan’s 1Q17 Earnings Call

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Freeport-McMoRan’s 1Q17 earnings call

Previously, we looked at key financial metrics from Freeport-McMoRan’s (FCX) 1Q17 earnings. In this article, we’ll look at the key takeaways from the company’s 1Q17 earnings call.

Indonesia (EIDO) issues dominated Freeport’s 1Q17 earnings call, which has been the case for the last several quarters. Though Freeport has received some respite from the short-term export license that allows it to export concentrates until October 2017, there are question marks over the long-term solution.

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Key points of contention

The key points of contention between Freeport and Indonesia basically involve Freeport’s post-2021 mining rights, construction of a smelter in Indonesia, and divestment of an additional stake in Indonesia operations.

Regarding the divestment of an additional stake in Indonesia operations, Richard Adkerson, Freeport’s CEO, said during the 1Q17 earnings call, “Our contract has no divestment obligations.” He also added, “We had previously indicated that we would agree to divesting from the current 9.36% up to 30%, and so we will have discussions with the government on the divestment percentage, the process, and valuation.”

In our view, the divestment valuation could be a key point of contention between Freeport and Indonesia as they work out a long-term solution for its Grasberg mine (RIO).

Labor issues

Copper miners including BHP Billiton (BHP) and Southern Copper (SCCO) have faced labor issues recently. During the 1Q17 call, Adkerson was candid about labor issues facing copper miners. He said, “There’s a correlation between copper prices and labor problems. And so, as the copper prices increased, that’s heightened our aspirations of labor for better deals.”

Freeport also faces labor talks later this year in Indonesia, which could only compound the issues the company faces in the country. You can read Inside Freeport’s Indonesia Problem to find out more about the issues facing Freeport’s Indonesia operations.

In the next article, we’ll look at Century Aluminum’s 1Q17 earnings.

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